Business Context and Reporting Period
Company: Green Plains Renewable Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 16, 2006
Event: Entry into a Material Definitive Agreement (Item 1.01)
On October 16, 2006, Superior Ethanol, LLC, a wholly owned subsidiary of the Company, entered into a letter of commitment with CoBank and Farm Credit Services of America to finance the construction of a new ethanol production facility near Superior, Iowa.
Key Financial Metrics and Debt Structure
The filing details a new financing package totaling $51,600,000. The filing text does not provide current revenue, profit, or cash flow figures for the Company, as this report focuses solely on the new debt agreement.
| Component | Amount | Details |
|---|---|---|
| Total Funding | $51,600,000 | For construction and working capital |
| Term Loan | $41,600,000 | Available until Dec 31, 2007; Principal payments begin July 20, 2008 |
| Revolving Loan | $10,000,000 | Available throughout commitment life; Step-downs begin approx. 6 months after term loan repayment |
| Interest Rate | Variable | Prime + 0.25% or LIBOR (1, 3, or 6 month) + 315 bps |
| Fees | $457,000 (Initial) | 0.75% origination fee ($387k) + $35k underwriting fee + $35k annual admin fee |
Material Changes and Covenants
The primary material change is the incurrence of significant new debt to fund expansion. Key covenants and repayment terms include:
- Free Cash Flow Payments: The Company must make periodic special payments equal to at least 75% of its "Free Cash Flow" for fiscal years 2007 through 2010.
- Payment Cap: These special payments cease once the aggregate total received exceeds $10,000,000 or upon expiration of the applicable fiscal years.
- Definition of Free Cash Flow: Defined as annual profit net of income taxes, plus depreciation and amortization, minus allowed capitalized expenditures, distributions, and regular term loan payments.
- Collateral: Lenders hold an insured first-position lien on all personal property and real estate owned by Superior Ethanol, LLC.
Outlook and Management Commentary
Project Timeline: The new 50,000,000 gallon annual nameplate capacity dry mill ethanol facility is expected to be in production by no later than December 31, 2007.
Management Statement: The Company believes it has secured sufficient funding to complete construction of both its Superior and Shenandoah ethanol plants.
Risks and Contingencies: The agreement includes financial and non-financial covenants that must be maintained. Interest rates are subject to adjustment based on market conditions (Prime or LIBOR).
Investor Verification Checklist
- Verify the Company's ability to generate sufficient "Free Cash Flow" to meet the 75% special payment requirement without jeopardizing operations.
- Confirm the construction timeline for the Superior facility to ensure the December 31, 2007 production target is realistic.
- Review the Company's existing debt load to assess the impact of the new $51.6 million obligation on overall leverage.
- Monitor the status of the Shenandoah plant construction, as management claims funding is now secured for both facilities.